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Role of Freight Forwarders

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Role of Freight Forwarders 7/15/2012 Role of Freight Forwarders Moderator: Thomas Andrukonis Director, Export Management and Compliance Division Roles and Responsibilities of Freight Forwarders Under the Export Administration Regulations July 18, 2012 1 7/15/2012 Parties to an Export Transaction • Exporter • Forwarding Agent • Intermediate Consignee • Ultimate Consignee • End-User • Principal Party in Interest What is a Forwarding Agent? “The person in the United States who is authorized by a principal party in interest to perform the services required to facilitate the export of the items from the United States. This may include air couriers or carriers” (15 C.F.R. § 772.1) 2 7/15/2012 Routed Export Transactions • There are two kinds of routed export transactions: – Those in which the freight forwarder or other agent is responsible for arranging transportation and other services, but the agent is not the exporter of the items. – Those in which the freight forwarder or other agent takes on the responsibility of the exporter of the items. When does a routed export transaction result in the shift in export control responsibility? • There must be two written documents transferring the export control responsibilities: – A writing from the foreign principal party in interest to the US principal party in interest expressly assuming export control responsibilities. – A power of attorney or other writing from the foreign principal party in interest to the freight forwarder or other agent authorizing the agent to work on the foreign principal party in interest’s behalf on the transaction. 3 7/15/2012 Routed Export Transaction • If both writings have been obtained, the freight forwarder, acting as agent for the foreign principal party in interest, becomes the exporter of the items and is responsible for determining licensing requirements and obtaining license authority. Routed Export Transactions • If both of the writings are not in place, the US principal party in interest is the exporter and retains primary responsibility for determining licensing requirements and obtaining license authority. 4 7/15/2012 Routed Export Transactions • In addition to the EAR, you must check the FTR to determine if your transaction is a routed export transaction for purposes of filing EEI. Routed Export Transactions • If you are in a routed export transaction, the US principal party in interest must provide you with certain information. – ECCN or sufficient technical information to classify the item. – Any other information that is known that may affect the licensing determination. 5 7/15/2012 Routed Export Transaction • Freight forwarder is responsible for: – Determining licensing authority, – Obtaining appropriate license or other authorization, and – Preparing and filing any export clearance documentation. All Export Transactions • Whether you are involved in a routed export transaction or not, all parties that are involved in a transaction subject to the EAR must comply with the EAR. 6 7/15/2012 Freight Forwarder Responsibilities • Destination Control Statement • Filing of EEI through AES • Screening of Parties to the Transaction • Embargoed Destinations • End-Use/End-User Controls (EPCI) • Record Keeping Destination Control Statement • Must be included on invoice and on bill of lading, air waybill or other export control document. • Must include: – “These commodities, technology or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.” • You may include more detail if so desired. 7 7/15/2012 Filing of EEI through AES • Filing of EEI is a submission to the US Government and the filing of false or misleading information may subject you to civil or criminal penalties. Power of Attorney • If the freight forwarder files EEI on behalf of the exporter, the freight forwarder needs a power of attorney from the exporter 8 7/15/2012 ECCN and License Authority • In a non-routed transaction, determining the ECCN and license authority for an export is the responsibility of the exporter. • If the freight forwarder makes the determination of ECCN and license authority on its own, the freight forwarder will be held liable if that information is false or misleading. Screening Parties to a Transaction • You should screen all parties to a transaction against the various lists published by the US Government. • Screening should be done as close to the time of export as possible as the lists change frequently. 9 7/15/2012 Lists to Check • Denied Persons List • Specially Designated • Entity List Nationals List • Unverified List • Debarred List • Nonproliferation Sanctions List Embargoed Destinations • Freight forwarders must take special care not to assist in exports to embargoed destinations that do not have proper authorization. – Cuba, Iran, North Korea, Sudan, Syria 10 7/15/2012 Enhanced Proliferation Control Initiative (EPCI) (Part 744) • A license is required to export any item when you know that the export will assist a foreign WMD or missile delivery system. • Additional restrictions on other activities by US persons that directly assist a foreign WMD or missile delivery system. Record Keeping • Records of all exports must be kept for a minimum of 5 years from the date of the export. • General rule: keep all documents unless the documents are on the list of documents BIS does not require you to retain (762.2). 11 7/15/2012 Inspection • Records are subject to inspection by agents in OEE, Customs, or other federal agencies. Know Your Customer • BIS strongly urges freight forwarders to review the “Know Your Customer” guidance and list of red flags in the EAR (Supp. 3 to Part 732). 12 7/15/2012 Compliance Programs • Freight forwarders, like exporters, should have a robust internal compliance program for ensuring compliance with the EAR. • An effective compliance program is taken into account as a mitigating factor if a violation is discovered during an investigation. Enforcement • Notable recent enforcement actions against freight forwarders: – $9,444,744 civil penalty against DHL for violations of EAR and OFAC regulations. – $156,000 civil penalty against Elite International Transportation, Inc., for EAR violations. – $250,000 criminal fine and 5 years criminal probation, and $399,000 civil penalty against DSV Samson Transport for violations of the EAR. 13 7/15/2012 Adrienne Frazier Senior Attorney Office of Chief Counsel for Industry and Security [email protected] (202) 482-5301 Role of Freight Forwarders Forwarder Perspective Presented by: National Customs Brokers and Forwarders Association of America, Inc. Compliance Committee Paulette Kolba – Panalpina, Inc. Area Export Compliance Manager USA –Vice President Pat Fosberry –John S. James Co. Corporate Export & Transportation Manager 14 7/15/2012 NCBFAA Export Compliance Committee . Established new sub‐committee in 2011 to bring in export compliance expertise to focus on export controls. Encouraging our membership to attend “Update “and other BIS sponsored outreach programs and trainings. Committee members represent small, medium and large forwarders. All of the members have national (and some global) responsibility for managing their export compliance programs. Developing internal policies and controls . Monitoring, auditing . Staff support Forwarder Perspective . Forwarder Role in Export Controls . Approach ‐ Incorporating Export Compliance into the Logistics Business Model . Challenges in Implementing Compliance Programs . The Routed Export Transaction Dilemma 15 7/15/2012 Forwarder Role in Export Controls First source of information for new Last line of defense exporters • Prohibitions, Red Flags • Providing guidance • Careful documentation review • Training and resource tools • Stopping illegal or suspect • Working with government agencies shipments to identify and reach new exporters • Government relies on the • Working with government agencies forwarder to stop and question. to create tools to assist new exporters Main compliance focus – the same as exporters FOCUSING ON CRITICAL RISKS • Not doing business with Restricted / Denied Parties • Not shipping or diverting cargo to Embargoed / Sanctioned Countries • Not complying with or not reporting Boycott language on documents and communications • Red Flags • Especially diversion red flags • If something doesn’t seem right, it probably isn’t right. • Not aiding, abetting, soliciting, attempting a prohibited act • Not misrepresenting or concealing any material fact in preparation or submission of an export control document (e.g. AES) 16 7/15/2012 Compliance Program Enhancing (or establishing) the compliance structure within the organization Large forwarder –more sophisticated compliance organization Smaller forwarder –most have a responsible person for export compliance Establishing and maintaining a robust export compliance program Tone from the top Documented processes Focusing on critical risks Training (ongoing, mandatory) Communications Controls (systems and process) Monitoring Auditing Meaningful corrective measures Framing compliance within the core logistics business model We are first and foremost logistics service providers. It’s not just moving freight from point A to point B anymore Experts in All Modes Customer Service of Transportation Logistics Service Provider Designing Logistics Customer EDI Solutions Solutions 17 7/15/2012 Framing compliance within the core logistics business model Preparing Arranging Reviewing Quoting Booking carrier transportation documents documents Restricted
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